Robert H. Frank of MIT writes on the ever-interesting subject of wealth and happiness:

An enduring paradox in the literature on human happiness is that although the rich are significantly happier than the poor within any country at any moment, average happiness levels change very little as people’s incomes rise in tandem over time.1 Richard Easterlin and others have interpreted these observations to mean that happiness depends on relative rather than absolute income.2

In this essay I offer a slightly different interpretation of the evidence–namely, that gains in happiness that might have been expected to result from growth in absolute income have not materialized because of the ways in which people in affluent societies have generally spent their incomes.

In effect, I wish to propose two different answers to the question “Does money buy happiness?” Considerable evidence suggests that if we use an increase in our incomes, as many of us do, simply to buy bigger houses and more expensive cars, then we do not end up any happier than before. But if we use an increase in our incomes to buy more of certain inconspicuous goods–such as freedom from a long commute or a stressful job–then the evidence paints a very different picture. The less we spend on conspicuous consumption goods, the better we can afford to alleviate congestion; and the more time we can devote to family and friends, to exercise, sleep, travel, and other restorative activities. On the best available evidence, reallocating our time and money in these and similar ways would result in healthier, longer– and happier–lives.

Imagine that you have three values (A,B, and C) and the third is the mean of the first two. The value of A represents conspicuous goods (bigger! faster! better!) and the value of B represents inconspicuous goods (shorter commutes, more leisure time, etc.), and the value of C represents the average of the two. It is Frank's contention that inconspicuous goods (B) add to happiness more than do conspicuous goods (A) and that over time, wealthier civilizations have increased conspicuous goods (we've got more stuff) while there's been a decrease in inconspicuous goods (we drive longer to work, work more hours, etc.). If this were the case, however, then we would be less happy today than we were twenty years ago. The happiness index would be somewhere between B and C, both of which are below the level of 1 that we started out with (note, you'll need to read the article to see why A goes up before it goes down and rests at the base value).



Except that Frank's argument is built on the fact that we're not happier, not that we're more unhappy. In fact, the studies he cites shows that we are, in fact, at the same level of happiness than we were before. That suggests to me that either the value of conspicuous wealth either counteracts the negativity of declining inconspicuous wealth or that, contrary to his findings on unhappiness associated with commute times and pollution, neither conspicuous or inconspicuous wealth make a difference in the long run.

Frank's argument lacks a silver bullet. If he could demonstrate that people with lower commute times, cleaner air, and less noise (inconspicuous goods all) are in fact happier on the whole than those with more living space and better toys (conspicuous goods both), then it doesn't matter how many trees he puts together, he doesn't have a forest when you consider that longer commute times and more work hours have not lead to a declining rate of happiness.

Next up: why people that read his essay may come to the wrong conclusions.